Buying a Home in Texas: What Out-of-State Buyers Get Wrong

Texas is the number one destination for people relocating from other states, and the math makes sense on the surface. No state income tax. A statewide median home price of about $342,000 (less than half of California's). Job growth in every major metro. Space, weather, and a cost of living that lets you actually breathe.

I'm licensed in Texas and I work with buyers relocating from California, the Northeast, and other high-cost states. Most of them come in thinking Texas is just cheaper across the board. And compared to where they're coming from, it usually is. But Texas has specific quirks that catch out-of-state buyers off guard, and the ones who don't plan for them end up with monthly payments that are higher than they expected.

Here's what you need to know before you buy.

The Property Tax Surprise

This is the big one. If you're coming from California, where Prop 13 keeps property taxes locked to your purchase price with a 2% annual cap, Texas property taxes will shock you.

Texas has no state income tax. That sounds great, and it is. But the state makes up for that lost revenue through property taxes. The effective property tax rate in Texas is roughly 1.6-1.8%, compared to California's effective rate of about 0.7-0.75% for new buyers. Some Texas counties and districts push above 2%.

On a $400,000 home in Texas, that's roughly $6,400-$7,200 per year in property taxes. The same home in California would run about $4,400 per year. On a $350,000 home in a Texas suburb with a MUD (Municipal Utility District) tax on top of the standard county and school taxes, you could be looking at $8,000-$10,000/year.

That difference shows up directly in your monthly mortgage payment. When I run scenarios for California buyers relocating to Texas, the "cheaper house" sometimes has a similar monthly payment once you add the tax differential. It's still usually less expensive overall (especially when you factor in no state income tax), but it's not as dramatic as the purchase price alone suggests.

What to do about it: Before you fall in love with a home, ask for the actual tax bill from the prior year. Don't use a generic calculator. Texas taxes vary wildly by county, school district, and whether the property is in a MUD or other special district. And make sure your lender is using the real tax number when they quote your monthly payment, not an estimate.

The Homestead Exemption (File It Immediately)

Texas offers one of the most generous homestead exemptions in the country, but it's not automatic. You have to apply for it after closing.

The current homestead exemption removes $140,000 of your home's value from school district taxes. That saves most homeowners $1,000-$1,500+ per year, depending on the school district rate. If you're 65 or older or have a disability, you get an additional $60,000 exemption on top of that, plus a school tax ceiling that freezes your school tax amount permanently.

The homestead exemption also triggers a 10% annual cap on how fast your appraised value can increase for tax purposes. In a state where appraisal districts are aggressive about marking up home values (some counties now use AI-powered valuations), that cap is a meaningful protection.

Out-of-state buyers miss this all the time. They close on the house, move in, and don't file the homestead exemption. Then they get their first property tax bill and it's $1,000+ more than it should be.

What to do about it: File for your homestead exemption with your county's Central Appraisal District as soon as you close. You'll need your Texas driver's license or ID with the property address on it. The deadline is April 30 of the tax year, but you can file retroactively for up to two years if you miss it. Form 50-114 is the standard application, available on your county's appraisal district website.

The Insurance Factor

Texas homeowner's insurance is expensive. The state consistently ranks in the top 5 nationally for insurance premiums, driven by hail, wind, hurricanes (along the Gulf Coast), and severe weather across the state.

The average annual premium for a standard Texas home is roughly $3,200-$4,000, with some areas and older homes running $5,000-$6,000+. If you're in a flood zone (Houston, coastal areas, or anywhere near a creek in Austin), you'll need separate flood insurance on top of that.

Coming from California, where homeowner's insurance has its own problems, the Texas insurance cost might be similar or even higher, especially if you're buying in a hail-prone area like DFW or a hurricane zone along the coast.

What to do about it: Get insurance quotes before you finalize your budget. Not after. Some of my clients have been surprised by $400-$500/month insurance costs that they budgeted at $200. Your real estate agent or lender should be helping you factor this in during the pre-approval stage, not at the closing table.

The No-Income-Tax Advantage (Do the Real Math)

The no-state-income-tax benefit is real, and for high earners, it's significant. If you're earning $150,000 in California, you're paying roughly $10,000-$12,000 in state income tax. In Texas, that drops to zero.

But here's where out-of-state buyers miscalculate: they look at the income tax savings and assume it offsets the higher property taxes and insurance. Sometimes it does. Sometimes it doesn't. It depends on your income level, the price of the home, and the specific tax district.

A buyer earning $80,000 and buying a $350,000 home in a Texas suburb might save $3,000-$4,000 in state income tax but pay $2,000-$3,000 more in property taxes and $500-$1,000 more in insurance than they would in a comparable situation in California. The net benefit is real but smaller than the headline suggests.

A buyer earning $200,000 and buying the same $350,000 home gets a much larger income tax benefit ($15,000+) that clearly outweighs the property tax and insurance difference. The higher your income, the better the Texas math works.

What to do about it: Run the full comparison before you move. Income tax savings minus property tax increase minus insurance increase equals your actual net benefit. Don't assume.

Where the Deals Are (and Aren't) in 2026

Texas isn't one market. The major metros are telling very different stories right now.

Houston ($324K median, +3.2% YoY) is the relative bright spot. It's the only major Texas metro posting positive year-over-year price growth. It's also the most affordable of the big four, with a massive geographic spread that gives buyers options at every price point. Inner Loop Houston is expensive. The suburbs (Katy, Sugar Land, Pearland, Cypress) offer strong value.

San Antonio ($265K median) is the most accessible major metro in Texas. Prices have softened slightly (down about 1.8-2.5% YoY), giving buyers more negotiating room. The city's healthcare and military employment base provides stability, and the cost of living is 20-30% below Austin.

Dallas-Fort Worth ($375K median) is in the sharpest correction among the big Texas metros, with 11 consecutive months of year-over-year price declines. The suburbs (Frisco, McKinney, Prosper) overheated during the pandemic and are now repricing. For buyers, this is an opportunity. Sellers are offering concessions, price cuts are common, and days on market have stretched past 80.

Austin ($520K median, down 2.5-2.8% YoY) is the cautionary tale. After the pandemic boom, prices have been declining for over a year. Inventory is elevated, days on market are stretching to 90+, and over half of listings have price cuts. If you're moving to Austin, you have the most negotiating power of any Texas metro right now. Just don't expect the 20% annual appreciation that early pandemic buyers saw.

What to do about it: The city you choose matters more than "Texas" as a general category. A $350,000 home in Houston, San Antonio, DFW, and Austin will give you very different houses in very different markets with very different trajectories. Research at the city and neighborhood level, not the state level.

Mortgage Considerations Specific to Texas

Texas has some unique lending rules that out-of-state buyers should know about.

Texas has specific rules around home equity lending. The state constitution limits how much equity you can access and how refinances work. Cash-out refinances in Texas are capped at 80% LTV (versus 90%+ in other states), and there are specific waiting periods and closing requirements. If you're planning to tap equity later for an investment, renovation, or other purpose, understand these limits before you buy.

The Renovation HELOC product I use for California clients is not available in Texas. This is a product-specific restriction worth knowing if you're planning a major renovation.

Conventional, FHA, VA, and USDA all work normally in Texas. The loan programs themselves are national. Your loan type, rate, and qualification are based on your financial profile, not the state. Texas just adds some specific rules around equity access after purchase.

No state-level DPA programs like California or Florida. Texas has the My First Texas Home program and some local programs, but the landscape is thinner than California's CalHFA or Florida's Hometown Heroes. Down payment assistance in Texas tends to come from individual lenders and city/county programs rather than a robust statewide system.

What to do about it: Work with a lender who knows Texas-specific rules. I'm licensed in Texas and I understand the equity and refinance restrictions that trip up buyers who are used to California or Florida lending norms.